A forum of free voices discussing today's Italian politics and its historical roots

Friday, December 30, 2011

Liberalisation, Free Trade, Kennels and Taxis

After more than a century of quarantining pets, you may now take your cat or dog into Britain by just showing a vaccination certificate. Most reports of this earthshaking piece of news concentrate on the pets; instead, they should point at the free trade element which is far more significant. When we think of controlling lobbies in the UK, most of us would look at the City, the defence industry, the unions (once upon a time). Wrong. It was the Kent kennel owners that managed to prevent the free movement of moggies and mutts for decades with far more staying power. I have no idea how they managed to literally act as gatekeeper and tollbooth to the UK but they did. Now that they have lost the monopoly, it’s a great day for the free market.

Now he has the really tough nuts to crack; he has promised to introduce a growth and liberalisation package for the Italian economy. In a 3 hour end-of-year press conference, Monti laid out his plans. There will be no special budgets (but he did point out that Berlusconi said the same a year ago and there were five). Over the next few months, he is going to start the much-vaunted liberalisation of the economy – not just taxis and pharmacists but also public services. That way, vested interests like taxidrivers, petrol stations and pharmacists will lose their monopolies and increase competition (paradoxically annoying the right and pleasing the left) and public services will be privatised (annoying the left and giving opportunities to the right). The theory is that Monti will be able to maintain support from both PdL and PD. He has also promised to make it easier to set up a business in Italy.

Overall, Italy does not score well on any of the economic freedom indices. The Heritage Foundation ratings have shown Italy falling over the last few years and is now on the edge of “moderately free” and “mostly unfree”, ranking 87 out 179, a disastrous showing after Berlusconi’s much trumpeted “freedom” for business. Monti would like to genuinely free up the economy.

On the other side, Monti has backtracked on the possibility of changing the 1970 Workers’ Statute in order to make firing easier. There was a threatened confrontation with the unions and even without changing article 18 of the statute (which guarantees that workers unfairly dismissed should be re-hired), there will be tension.

There are not only economic issues. He has promised to address civil law reform, an issue which is actually economic as much as social or justice. Civil cases drag on for years and often a successful plaintiff has wound up the business long before the winning verdict.

Two other issues are high on the agenda but which the government will avoid carefully – electoral reform and citizenship reform. Assuming the Constitutional Court gives the go-ahead within the next month or two, there will be a referendum next year to repeal the present fixed party list system. This means that Parliament will have to concentrate its collective mind if they want to have any say in the matter rather than leaving it to the vote. No one admits to supporting the present porcellum (pig’s dinner or worse) as the law is nicknamed but they do not know what to replace it with.

On the citizenship issue, there is a growing body of opinion in and out of Parliament which reckons that not giving Italian citizenship to children born and brought up here is not only unjust but counterproductive as it alienates useful member of society.

In the meantime, unsurprisingly, economic issues dominate.

The pre-Christmas budget will start to bite with the new property tax to be accompanied by a revision of the land registry which not only underestimates the value of most property but apparently is missing up to 600,000 properties… Also on the tax evasion side, cash payments above €1,000 are no longer legal for private transactions and €500 when dealing with the public administration. This in theory will make more business traceable. Retirement ages have been raised but there are still differentials between men and women and between salaried self-employed workers. The regional tax has been increased and already a fuel excise hike has been applied.

The private and individual difficulties and suffering combine with the bleak public outlook with the continuing risk of Italy not being able to service its debt leading to a meltdown of the euro. So far Monti has very definitely changed the style of Italian government and introduced a level of international confidence that was not there before but the real test will be over the next 6 to 12 months. There is substance in the country’s economy but it will take very careful guidance and some luck too.